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Loan Modifications DailyRecent loan modification activity

April 14, 2009

By staff

A Virginia firm is helping delinquent borrowers avoid mortgage fraud prosecution while extorting rate and principal reductions from their lenders. Another company says some borrowers should just walk away from their mortgages. Most loan modification firms, however, are defending their fees as the government advises modification prospects to avoid shady firms and utilize free services.A statement yesterday from Ocwen Financial Corp. proclaimed that the West Palm Beach, Fla.-based servicer was among the first — “if not the first” — servicers to process loan modifications under the Home Affordable Modification Program. The progress, which came despite that form servicing contracts have not yet been provided, was enabled by a 65 percent increase in key staffing and “a highly automated, scalable loan servicing platform.”

The special servicer claims that only 24 percent of its modifications become 60 days delinquent within six months of modifying, compared to the 41 percent reported this month in the OCC and OTS Mortgage Metrics Report.

Ocwen’s chief executive officer praised President Barack Obama and his lieutenants in the statement for the “sweeping” modification program and said they “fully support” the plan. Under the program, Ocwen stands to earn a $1,000 up-front fee for each qualified modification completed and $1,000 each year for up to three years as long as the modified mortgage remains current. In addition, if the modification is completed before the loan becomes delinquent, Ocwen will receive a $500 incentive.

MFI-Mod Squad LLC issued a statement warning about Florida-based Mortgage Mitigation Clearing House, which MFI claims is a “shady” and “unlicensed” modification firm that it has received complaints about from borrowers in Kansas, Michigan and Massachusetts. Mortgage Mitigation reportedly charges a fee of $2,700.

A report from the Virginian-Pilot indicated that loan modification firms in Hampton Roads, Va., charge between $795 and $2,000 for their services. Fees at local firm Real Estate Resolutions LLC range from $500 to $1,500 in addition to attorneys fees of $1,000 or more. One customer paid $1,000 to renegotiate her mortgage, while Axcel Financial Corp. charges $795 and Nationwide Loan Modification Bureau LLC charges $1,200 up front.

WOWT-DT in Omaha, Neb., reported that First Universal of Florida allegedly collected $3,000 for modification services from an Omaha couple who nearly went into foreclosure anyway. Their lender, CitiMortgage, is reportedly working directly with the borrowers to resolve their loan.

Pennsylvania’s Department of Banking issued a warning advising delinquent borrowers to avoid modification firms that charge a fee, use law-related terms in their advertising or falsely appear associated with the federal government or the federal stimulus package.

A recent federal crackdown on modification firms was praised in an announcement this month from United Law Group. The company said that only law firms can compel a lender to respond to modification requests.

“Up until now, it’s been like the Wild West with unscrupulous loan modification companies sprouting up everyday,” United Managing Director Sean Rutledge said in the statement. “United Law Group helps its clients to find a legal resolution to debt-related issues and supports homeowners who’ve been victimized by predatory ‘loan modification’ companies.”

But the government’s blanket approach to regulating loan modification companies — advising delinquent borrowers not to pay for modification services — is just an abdication of its responsibility to utilize an adequate regulatory process, a press release Sunday from US Mortgage Mod in Philadelphia said. The firm claims it legitimately earns fees by negotiating on behalf of its customers, which pay the fee in three installments. US Mortgage Mod projects 2009 volume of 1,000 completed modifications.

Mortgage Fraud Examiners issued a statement today condemning servicers that report mortgage fraud uncovered during the modification process. The company encouraged borrowers to alter their loan modification applications so that they match the information submitted on the original loan application.

The Ashburn, Va.-based company said that President Obama’s own modification plan is a failure, and accused lenders of preferring to foreclose instead of taking “responsibility for lowering interest rates or forgiving principal.” Mortgage Fraud Examiners hopes to extort favorable modification terms from lenders by exploiting compliance mistakes — which it claims occurred on 85 percent of all loans.

Over in Indiana, U-Move-On said that it may be in the best interest of some borrowers to just walk away from their mortgage obligations and let the lender suffer the consequences. But many borrowers have several options such as loan modifications that the company hopes to assist them with.

A $99 automated loan modification service was launched earlier this month by Homeowner Toolbox Inc. The service provides a detailed financial evaluation with customized guidance on how best to present a modification request. It then gives the borrower a modification package ready for lender presentation. It also rates the likelihood that the requested terms will be approved.

Foreclosure case law is being offered online by Loan Modification Studio. In addition, five borrowers are picked monthly by an online community to receive free modification services from the firm, which also hopes to lure prospective customers with a mix of free and paid foreclosure information.

Free modification services will be provided by Chicago-based during all of April, a recent news release said. The company utilizes real estate agents for its services.

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